Category: Financial Crime

Global Threat Assessment
by John Cusack

Despite the limitations presented in estimating criminal activity designed to be hidden, the results in the Global Threat Assessment present a bleak picture.

Criminal markets are generating more illicit funds than at any other time in our history, with ever more harmful effects inflicted against every Country, against billions of people and against our increasingly fragile environment.

We are witnessing the transformation of organised crime into very big business, leveraging networks to connect criminal actors, adopting poly criminality, embracing new cyber tools and opportunities afforded by the transformation to digital.

How big, which Countries, by what Methods and by which Gangs, is summarised in this Global Threat Assessment, using over 100 publicly available studies or reports from credible sources, together with personal observations and recommendations from the author.

Just under a year after the FATF published updated Recommendations incorporating VASPs and virtual assets in June 2019, including requiring VASPs come up with a solution to comply with FATF Recommendation 16 on sender and recipient information with VC transactions, the crypto industry announced a standard messaging format to fulfil the requirement. It has been an intense journey since the industry and the FATF first met in May 2019, demonstrating an exceptional level of collaboration in the fight against financial crime.

A Joint Working Group on interVASP Messaging Standards (JWG), a body made up of the three leading industry associations, and led by luminaries such as Malcolm Wright, now Advisory Council Chair at Global Digital Finance (GDF) and Chief Compliance Officer at Diginex, and Sian Jones, former regulator and now partner at XReg Consulting, started to promote the idea of a common messaging standard to underpin the different technical solutions that were being promoted by various technical solutions providers.

Following the EU Commission’s proposed changes to its list of 3rd countries whose money laundering deficiencies pose a significant threat to the financial system of the EU published in early May, 2020, the results, can be criticised. For example see previous post here. The results suggest the EU list is based on a flawed methodology that overweights the response and underweights the threat. The result of the EU exercise is to add 12 new countries and remove 6.

Since the publication of the revised EU list, Financial Crime News have concluded “deep dives” on both a country removed from the list, “Ethiopia” and a country added to the list “Mauritius” and compared the two from a financial crime perspective and against 38 other Sub Saharan African Countries.

In this interview with Wendy Ennis, FCC Head at new virtual Bank “Mox” in Hong Kong, Financial Crime News wanted to hear about Wendy’s journey from an established large Bank and team to a new startup and virtual Bank, the opportunities challenges and the experience along the way.

Q1 What is Mox?

Mox is the Hong Kong virtual bank backed by Standard Chartered, in partnership with HKT, PCCW and Trip.com. We have the combined power of a well-trusted international banking group, Hong Kong’s telecom and lifestyle market leader and Asia’s largest online travel agency. Our aim is to deliver a suite of retail financial services as well as lifestyle benefits all in one place, growing your money, your world and your possibilities.

On the 7th May, 2020, the EU proposed a number of third countries to their list of countries whose money laundering deficiencies pose a significant threat to the financial system of the EU, a year after it’s previous attempt was derided by many and withdrawn. EU Member Countries should nevertheless challenge the list as whilst this attempt is better than the last, it still falls short and the grade is must do better.

1 Background

According to the EU’s 4th Money Laundering Directive (Article 9 (1) of Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, as amended by Directive (EU) 2018/843), “third-country jurisdictions which have strategic deficiencies in their AML/CFT regimes that pose significant threats to the financial system of the Union (“high-risk third countries”), must be identified in order to protect the proper functioning of the internal market.”

Today is “International Forests Day,” a day to raise awareness of the challenges forests face around the world and in turn our own futures.

Forests are home to about 80% of the world’s terrestrial biodiversity and are under threat, with rates of deforestation at unsustainable levels. A significant piece of this is due to illegal logging carried out by criminal enterprises fuelled and facilitated by corruption. Of all the so called Green Crimes, Illegal logging is likely to generate the most in illicit proceeds. It’s estimated (by Chatham House), that around 30% of the worlds timber production from 9 main tropical forest producer countries is illicit and that nearly 10% of imports into consumer countries are from illegal sources.

According to the best available sources the illegal Wildlife Trade is valued at approx US$7 – 23 billion a year, and is regularly described as the 4th most lucrative crime after any of drugs, counterfeit goods, humans and arms, with Africa the main area of concern, in particular due to the killing of Rhinos, Elephants and Pangolins, by criminal gangs that move horns, tusks and scales shipping these clandestinely onto markets in Asia.

That the illegal wildlife trade is in the billions of dollars a year and includes iconic African mammals such as Rhino’s, Elephants and Pangolin’s is not in question, and neither are the claims that criminal actors are involved and that Asia is a main destination.

Whilst this picture is a popular one, in which the illegal wildlife trade is most often portrayed, by digging a little deeper the picture becomes a little less about Africa and Asia, and involves all regions, including North America and Western Europe, and a little less about iconic African Mammals and includes reptiles, birds, fish, plants and shells.

Fishing is one of the major industries around the world, employing hundreds of thousands, and as a key source of protein for over 3 billion people; even a small level of IUU fishing can generate billions of dollars in illicit profits.

With an estimated 90% of the world’s fisheries classified as fully exploited or overexploited, legal and sustainable fishing operations are critical to maintain the integrity of global fishery resources.

It is estimated that illegal and unreported fishing represents approximately 14 to 33 percent of the global marine capture value , equating to an estimated US$15.5 billion to US$36.4 billion annually, making IUU Fishing one of the top 10 crimes by proceeds across the globe, and a significant contributor to “Green” or “Environmental Crimes.”

In November, 2019, Standard Chartered Bank announced that it had joined forces with Quantexa to boost further their approach to fighting financial crime. In this conversation with SCB’s Head of Financial Crime Strategy & Innovation, Praveen Jain, and Quantexa’s CEO Vishal Marria, Financial Crime News probes deeper into the “why”, the “what” and the “how” to provide insights into an “industry first” and why it’s important.

FCN: What was the problem and what was the solution?

PJ: SCB was looking for a best in class solution to support its more than a thousand investigators in its hubs as well as in its Global Financial Intelligence Unit conducting complex financial investigations generated from processing over a billion transactions a year.

Seventy years ago, this week, the United Nations Convention for the Suppression of the Traffic in Persons and of the Exploitation of the Prostitution of Others was adopted, and is marked each year by the UN and member states as human trafficking gets worse. An example of an exciting response though comes from the launch of the TAHub, which is a cross sector anti human trafficking research platform which is generating a lot of interest.

Described as the richest source of data on human trafficking anywhere, Directors are expected to approve a ‘try before you buy” initiative at their meeting this week. With support from IBM as the technology partner, and NGOs uploading data in numbers, opportunities to interrogate and utilise the data are now available.

Seventy years ago, this week, the United Nations Convention for the Suppression of the Traffic...

Publishing FCN 3

When I started Financial Crime News, I wanted to offer a digestible collection of both interesting and relevant materials to arm financial crime fighter’s with additional tools to help enable them to do their work. Read more…

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